Fuel Prices: Center Finally Responds To Common Man’s Plight

Shares of oil marketing companies fell after finance minister Arun Jaitley said that the government has asked the companies to absorb Rs 1 cut on fuel prices

Speaking at a press conference on Thursday, Finance Minister Arun Jaitley announced that the cut will be effected through slashing of excise duty to the tune of Rs 1.50 per litre, while the oil marketing companies (OMCs) will absorb the impact to the tune of Re 1 per litre.

Several states on Thursday slashed fuel prices after the Narendra Modi-led Union Government announced a Rs 2.50 a litre cut in petrol and diesel prices.

Addressing a press conference in New Delhi today, Finance Minister Arun Jaitley said the government will write to all states to cut a portion of their tax as well on petrol, diesel. The prices came down following Union Government's decision on Thursday to cut down the excise duty Monday fuel in the wake of falling rupee and increasing crude prices.

"Moreover, Gujarat has given Rs 2.50 relief per litre on both petrol and diesel, while Maharashtra has only cut VAT Rs 2.50 on petrol".

Jaitley said the government wanted "to provide relief to consumers as the global crude price had touched $86 per barrel, a four-year high". This will reduce the overall price by about Rs 5.

Jaitley said the total impact of Rs 1.50 cut in excise duty is about Rs 21,000 crore for full year and Rs 10,500 crore the reminder of current fiscal.

"In general, what's driving emerging market weakness is a stronger United States economy ... there is a lack of clarity on the effectiveness of rate hikes as a currency defence", said Sunil Sharma, chief investment officer with Sanctum Wealth Management.

Other pump owners expressed apprehensions that with the reduction in Value-Added Tax on petrol in Maharashtra, diesel prices will gradually catch up with petrol if immediate relief is not provided. Kerala Finance Minister Thomas Isaac also announced that the government will not reduce prices at the state level.

Nationalist Congress Party's Leader of Opposition in the Legislative Council Dhananjay Munde criticized the belated decision and reiterated that petrol-diesel must be brought under GST for providing genuine relief to the people.

The Economic Survey had identified rising oil prices as one of the biggest risks to the Indian economy stating that it would crimp real incomes and spending.

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